if they could hear what we talk about, chicken farming, things like that? >> it's very consistent with what they hear on television. but slightly less censored. >> all right. the market is down. the dow down 135, nasdaq down 32. s&p down 15. okay. well, we've had a nice run, a little pullback, not going to kill us. >> that's right. we keep watching and see if we can turn it around or not. in the meantime, i'll see you this afternoon an "street signs." right now it's time for "the call." the university of michigan's consumer sentiment comes in at 362 for august compared to 66 for june. the wall street journal has hired duf and phelps to auction

hedge fund assets. and a $500 million initial public offering using the proceeds to pay down debt. that's cnbc.com news now. i'm courtney reagan. good morning, and welcome to "the call." i'm trish regan. market off 18 128 on the dow on mixed economic news. right now it's looking like it could be an uneven economic recovery. just exactly what is in store for this recovery, and how can you profit from it? hey larry. >> all right, i'm larry kudlow. thanks, trish. the obama administration wants to charge large banks higher fees than its smaller rivals to pay for financial reform. in the "call of the wild" we're going to discuss whether it's a good idea and how you might be affected. hello, melissa. >> hey, larry. i'm melissa francis. michael vick is back in the nfl, signing with the philadelphia eagles. we'll look at what this means for the team's image and the nfl. this is "the call" on cnbc.

all right. stocks are at a loss this morning, on weaker than expected economic data. i don't know, consumer sentiment was light, industrial production up for the first time in eight or nine months. the dow, however, off about 1.5%, down 132 points. the s&p following dutifully behind, down 14.90. the nasdaq also lighter. by whatever it's lighter by. 32 points. all down 1.5%. oil prices, however, are on the soft side, as melissa francis correctly predicted to me just a few moments ago. $68.66 gee whiz, trish, production up for the first time since last fall. consumer prices flat. doesn't look so bad to me. of. >> hey, well, you know, there is this mixed data, larry and i think that's what has some folks confused right now. you had a lot of positive data last week in terms of the

unemployment reports, in terms of gdp. also saw better than expected productivity reports, which tends to happen at the end of the recession. and what do you know, we have the retail sales data yesterday, and then consumer sentiment today, so all of this is really a war right now that we're seeing in the market as investors weigh and decide and sift through data. bob, we're watching retailers today, and a lot of them came in fairly decent today with earnings and yet all trading down. is this a function of a fact they have been up so long? >> are that's partly it. also because the guidance isn't where some people want them to 3 be. jcpenn jcpenney, and nordstrom and abercrombie trading up, all international sales. but here's the point. jcpenney offered improved guidance, looked good, but traders are calling it conservative. so 75 to 90 cents, above what it was before. look at the analyst consensus,

the sweet is already there, folks, because they believe jcpenney was going to do exactly this. so now same-store sales down 5%, improvement. 2010, raising numbers for the analysts. so jcpenney better be able to figure out process store sales growth. but you're right about the run-up. look how the stocks have run up in the last month. 20, 30, 40%, just in the last 20 trading days, folks. there is your move up and that's why you're not getting any big boost up. >> let's talk about the economic data. i was just saying, it's really conflicting, because on the one hand, you get good news. on the other, plenty of bad news. and traders are trying to make sense of it. >> look at the consumer report, the michigan report. that was a disappointment. capacity utilization wasn't quite what people were anticipating either. that's disappointing. so the stocks that are down are the ones that would be down if you had doubts about a stronger recovery. there is your cyclical, classic names that would do better on a

v-shaped recovery. they're the ones down 2, 3, 4%. >> okay, bob pisani. we head to the nasdaq, and scott wapner. >> nasdaq's week today, technology selling off, down 1.5% right now, so we're looking at internet stocks and travel sites, for example, if consumer as -- maybe not traveling as much if they don't feel good about their personal situation. expedia down 3.5%, amazon is weak, ebay, and price line, as well. names like celgene down 1.5, and genzyme, and big cap technology not performing better today. apple shares under pressure. cisco is a little bit weaker today, as is intel. in fact, the selloff in intel as some of the chip stocks have weakened down 2%. and how about those dismal numbers from the npd group on video game sales, down 29% in july year over year. that's just an ugly number. so is there any fallout today from the video game makers?

not really from electronic arts, because it's up 1 .5%, so bucking that friend a little bit. melissa, back to you. >> thanks so much. a big week for economic news, topped off by this morning's cpi and weaker than expected consumer sentiment data. steve liesman is here to sort it all out for us. >> for investors, it's not easy, being challenged with mixed economic data. inflation under control, industrial production up, along with growth forecasts. but consumers remain in a foul mood. look at the cpi here, unch, don't see that many times. on the year over year basis, the headline is down 2.1%. the core rate up just 1.a25%. what you want to look for in the cpi details, pricing power or falling prices. new cars, a little power there. apparel up, but inside that a lot of mixed data ware. men's apparel falling, but women's footwear on the way up. hotels, you don't want to be in that business right now.

talk to scott wapner there, education a perennial price gainer. the deflation or disinflation scare not as bad as in '03, '04. this is the percent change. but certainly a lot of disinflation in the economy. the challenge is i think investors looking for companies with industries in pricing power. industrial production data was up for the first time in a very long time. a half a point. capacity utilization up, but not as much as economists had expected. and there is that foul consumer in light of the positive supply side stuff, what about the demand side? 63.2. july, 66. the fewest consumers in the survey's 60-year history, reporting improved finances, reuter says. many citing job losses, shorter working hours, smaller wage gains. many say the obama optimism may have worn off. and investors are getting much more optimistic about overall growth, adding a full 2 percentage points to the third quarter, and a half a point to

the fourth quarter. of but if you look at the unemployment numbers, they're pretty bearish there and still see above average unemployment of 8% all the way out to 2012. so melissa, put all that into your model and then come up with an vesting thesis. >> okay. >> can i just ask, did you to say investor production? manufacturing production up a full percent. utilities were down because electricity price is weak and demand for it is weak. >> which is actually good -- >> that's a bearish sign, larry. >> and business equipment was up. probably 0.5%. cap ex spending is recovering. >> very favorable supply side picture there, but no demand at the moment. >> supply creates its own demand. >> say what? >> supply creates its own demand. >> say what? >> we have -- >> i'm making a joke, larry. >> you have to produce to consume. >> okay. this is precisely the argument we meant to have, so far it has been a very uneven economic

recovery. the manufacturing sector rebounding much better than the service sector. so joining us now to discuss what all of this means for the overall economy is bob barrow, chief economist at global investors, and chief economist at global investors. >> when i survey this data, it seems clear that the consumer is going to be the very last thing to recovery. the consumer is getting pennies together, cowering in the closet, shivering in fear, the last one back out. what does that change? >> overall, you have to look at the overall economy. and the consumers are really just one piece of it. overall, we think there is a foundation building for a strong -- or at least a sustainable recovery. inventories are plunging to unprecedented lows, old mother hubbard's cup board is completely bare. autos and housing not subtracting from economic growth. still losing jobs, but at a much slower rate, and there are glimmers of positive news of that in the future. and also, china is just booming.

pulling asia -- the rest of asia along with it, and adding to our net exports. so while consumers are not going to be the drivers, others will take their place. >> michael, we can same at this point, the consumer is terrible, continue to be terrible, they're the last ones out. how do you deal with that? >> let's talk about the consumer for a second. foreclosures up 7% month over month, and up 35% year over year. and the employment picture continues to be very, very weak. and here's the problem. the problem is, we just celebrated the end of deflation. the year over year deflation was minus 2%. that is over. starting in october, and peaking around december, assuming oil prices remain stable, instead of being down 100%, oil is going to be up 50%. instead of being down 35% on the crv index, it will be up 26%. and that is going to force ben bernanke so raise interest rates to defend the dollar. >> i don't know that he's really going to do that.

>> he might do that. if he doesn't -- >> he should, but i don't think he's going to do it. >> if he doesn't do that, we continue to destroy the currency, and all of the gains you'll get will be nominal in nature. >> yeah, but michael pento, despite that, you have a very optimistic third quarter view. >> i do. >> you can see the production is picking up, and i just want to ask you this. doesn't business really lead the consumer? i mean, wall street is always so demand-side driven. if production is rising, if business investment is rising, doesn't that bode well for consumer? >> well, we're rebuilding inventories and the question you have to ask, will those inventories be drawn down? i'm just going through the fact that a consumer remains very much -- >> you have to come up with something eventually. >> no, they don't. they have to pay off their debt eventually. >> not sure about that. >> larry -- i want to ask larry a question, because a lot of people have this a little bit backwards and i'm trying to get this straight in my brain here. high savings rate do not necessarily mean lower growth rates. >> no.

you're right. >> let me -- >> you are correct. >> let me finish the point. when i look back to the 0s and i look at 5, 6, 7% savings rates, i see 3, 4, 5% -- >> savings equals investment. >> why is everybody concerned that -- >> i'm not concerned about -- what are you using -- >> just one other question. >> the first two years of the rebound in '83, '84, from a very bad recession, we had had high saving, we also had 7.5% real gdp. and what people forget about this obsessive savings rate is we don't put it in mattresses. this is a modern financial system. that money is intermediatated and recycled into investments and businesses. >> but it -- is it being used to purchase capital goods? >> when a business buys capital, when a business buys computers, when a business buys any equipment whatsoever, that adds to the economic growth rate, and you have to have jobs. >> first of all, mr. liesman -- mr. kudlow -- when you talk about savings --

>> bob bower, industrial production is picking up in some sense because the car business is picking up. and yes in the short run the cash for clunkers. look at the ford story, ford is picking up production in q3 and even more in q4. if you ask me, that's a good beginning. >> it is. and you have to get started somewhere. rebuilding inventories is exactly what we need. production has been so far below even the meager level of sales, that that's going to pull some people back to work. and net exports -- >> not saving as a nation. talking about personal savings rates. that's the personal savings rate. >> we've got to go, guys. >> steve liesman -- >> bob, michael -- >> steve liesman gets the supply side award for correctly understanding the savings being rechannelled into business. thank you steve. >> he gets all of the awards. the s&p 50% climb off the march lows isn't enough to term mohammed elarian bullish.

his comments on how to invest coming up. >> and then the philadelphia eagles are taking a gamble on michael vick. new details on the contract. and is he worth the risk? all that coming up only here on "the call." esesesesesesesesesess

i'm scott cohn in the cnbc newsroom with the latest on

colonial bank shares one day after a federal judge froze a billion dollars of the bank's assets, it appears the fdic is taking the company into receivership, and bbnt will buy the the branch and its branches, according to dow jones news wires. no word on what will happen to the bank of america litigation. remember, bank of america had sued bbnt over the return of some funds, but it does appear now that colonial bank shares which have been halted all day today will now be taken over by bbnt. guys? >> okay, scott cohn, thank you so much at our breaking news desk. the s&p up almost 50% since march lows. you can see by this chart, take a peek, back in march where it was. look at that, 46% of the gains since march 9th. mohammed el-erian appeared on "squawk box" this morning and said the stock market is getting ahead of itself. >> the market has gotten way ahead of the reality on the

ground. the market and the economics are not reconciled right now. >> big question, is he right? we want to ask our bull, jordan kimmel, author of "the magnet method of vesting conscious and our bear and my old friend, craig peckham, go way back, trading strategist with jeffries and company. craig, terrific to see you. >> likewise, trish. >> i'm going to kick it off with you here, because you are in agreement with mr. el-erian. why do you think the market is getting ahead of itself and is overvalued right now? i think we need to be careful on how we position that, only because what stock markets do is discount not what's happening now, but what's happening in the future. so while we're absolutely right in saying that the stock market's behavior lately doesn't match with what is happening in real-time, as we look out to next year, there is certainly a high level of expectations being built into it. right now, the consensus forecast for the s&p 500 is for a 25% earnings gain. that's a pretty spectacular increase. and we've got the stock market valued on those earnings right now at about 14 times.

that's not a huge upside relative to long-term valuations for the market. so i think there is, you know, some credibility and viability to the case that we need to be careful about chasing this market higher. >> okay. jordan, craig makes some really good points. if if you look at these valuations, some might say the market is getting ahead of itself. but when you look out to third and fourth quarter gdp potentially being positive, what is that telling you? had. >> well, you know, what you really have to look at is rarely does the economy and the stock market trade sink and sink. what happens is the stock market will always lead the economy up and down. so anyone looking at exactly this quarter earnings or even next, what you really have to look at, the psychology of the market, and basically nobody is long-term bullish in talking about a bear market rally, talking about the economy rolling over. you know, one thing you have to do also is that i'm not going out to buy all companies. you have to be selective. when you look at valuation based on cash flow, the market is trading at one of the lowest best ratios of all-time. if you go to the tip of the bell

curve and you use stock selection, they threw the baby out with the bath water. the public is scared to death. the psychology is terrible. that's how you make money in the stock market. >> craig, you know, leading indicators in the u.s. are pointing to recovery. storks being one of them. you also saw the story in the paper today, france and germany in recovery in the second quarter. we know china. we know india. i mean, aren't these favorable conditions, mohammed may be right about a short-term pull back. but you look at the global scene, you look at the u.s. scene, really isn't this the moment? >> i don't think anybody is debating that the trajectory is certainly improving. i think that the real question here is matching up where expectations reside relative to where securities are valued at this point in the cycle. and i think it's absolutely reasonable after this massive move off what we're quite admittedly over sold levels in march, for us to take a break and think about just how realistic a 25% earnings growth rate is going to be in 2010, because right now, that's about where this market is assuming. >> okay, so craig, how long a

break? you say take a break. when are things going to actually shift is and move upward in your opinion? >> we have got to get through the next cycle of corporate earnings. coming out of the second quarter, this market had a terrific sense of relief, because earnings estimates were beaten in most cases, but it was coming, as everyone knows, from reductions in cost structure. the reason why stocks go up on those sorts of earnings surprises is because it presumed that with revenues moving higher, there is a lot more pratting leverage. the question is what is going to be the time of this revenue and the case is still open in that respect. >> jordan, pullbacks can be healthy. if there is a new bull market, pullbacks will be healthy. why can't we run this thing back a year ago, more or less, prelehman. that's what the bond trends are telling us, and you see the turning points in the economy, including today's investor production. that's about 1200 on the s&p. how would you rank the probability and the odds of

getting stacked at 100 on the s&p? >> it depends on when you're talking when. clearly it's going to go through those levels, might not happen right away. >> through them. >> through them. the whole point here is what we're seeing is these rallies are short -- the pullbacks are short, even low volume. big money right now, realize, they've got scared out actually with the little guys. when you go to zero percent treasuries, larry, no pension plan i nobody can reach long-term goals. so you're seeing all of a sudden instead of selling the rallies, you're looking to buy the dips. of course, pullbacks are healthy. of course, entry points -- >> what are you buying? >> i think what i'm doing -- either small and mid cap stocks always lead the market. i use something called a magnet methodology. we have companies that are blowing out 40, 50% revenue growth. margin acceleration. it happened to trade 100, 200, $300 million companies and not so many of them. so i don't believe in overdiversification. i don't believe in the dart board. i believe you really have to

know what you're doing, have a quantitative method to isolate the good companies, not the ones that got hit the hardest. of small, mid cap tech, technology. these are the growth sectors. there is leadership. and by the way, there is no down side to leadership anymore. the new low lifts has disappeared, and i think you have a much healthier market. the psychology, even a technical guy cannot complain about this market. but i go back to cash flow, larry. you have to look at individual companies like you own them. >> all right. i think that's fair enough. but to trish's question. are you in a recovery play with this small and mid cap? is it a recovery play? cyclical? >> it's a new bull market. no, it's a new bull market. >> across the board. >> your lips to larry's ears. >> mohammed may be right, but i think trish, pullbacks are the healthy evident part of this story. >> absolutely. >> craig, good to see you. larry and melissa, craig and i went to high school together. >> >> we figured it was

something like that. but i was going to go off line to ask you what that was about. after serving an 18-month prison sentence, michael vick is back in the nfl and getting millions from the philadelphia eagles. >> yes, fans have a national debate whether vick's comeback is justified. what will it do for the image of his new team, that's the eagles, and the entire national football league. well, gee whiz, our experts will weigh in, only here on "the call." when this shoe store added aflac to its employee benefits package at no direct cost to the company... it was a perfect fit. find out more at aflac!... ...forbusiness.com

michael vick is back in the nfl, the eagles holding a press conference announcing the signing. darrenery rivel joins us. >> michael vick fresh off signing a two-year deal with the eagles, publicly apologizing for his past conduct just moments ago. >> i made some mistakes, i've done some terrible things, made a horrible mistake. and now i want to be part of the solution and not the problem. i'm making conscious efforts in the community to work with the humane society and hopefully i can do that locally and continue with my diligent efforts and

bringing awareness to animal cruelty, you know, and, you know, dog fighting in the inner cities and in our communities. >> vick, who signed a two-year deal that could be worth up to $6.8 million was flanked by eagles' coach andy reid and vick's mentor tony dungy. he said he can't believe what he did and is helping the animals and everything in the future. this was the deal, because of the liability vick presented, reid protested, it wasn't clear if he was going to get a job in the league. how well he does in this ongoing press conference and seems to be doing pretty well could make league sponsors and 44 of the eagles' sponsors feel better about their exposure to risk. and there you see, it seems like the press conference is over. did he a pretty good job. listen, vick is doing what he has to do here. he said he would take all questions. i didn't expect this to only last 27 minutes. but now he's just got to work with everyone who hates him.

>> well, will they have him on the sidelines? >> no. because that would be not genuine. >> with a german shepherd? >> no. >> larry is a dog-lover, i want to say to everyone out there who is about to e-mail us. when we come back, what will this do to the philadelphia eagles and is michael vick worth the risk. let's bring in crisis management expert ceo of desenhall resources. he has paid his debt to society, we have short memories as fans. what do you think? are people going to forgive him and move on? >> i think forgiving him and moving on is not relevant. i think that people are making this more complicated than it needs to be. it's about performance. especially in philadelphia. you know, in philadelphia -- >> not if people hate him and they don't buy tickets to the stadium because they hate him. it's not even possible. philly fans are tough. maybe they don't care. >> well, wait a minute, though. philly fans -- these are people who booed santa claus 20 years ago. these are people, you know --

they had several years ago, they had actually had a jail in the stadium, okay? so michael vick could have done dog fighting with the girl scout troop, provided that he won everything would be fine. >> that's very true. you're right on there. eagles fans are going to go. maybe there will be one or two people that will say here is my season tickets, but that's certainly not going to happen. if he can help them win and be a back up to donovan mcnabb, they're going to like him. the question is, they have 44 corporate sponsors, will they feel any pressure? and now it's probably vick's obligation to do whatever he asks to to apiece any group that's going to stand in front of the stadium and protest. >> well, the apology is a price of entry. that's all. you know, people are making too much of this. he does not need to go on a giant road show for many months, holding puppies, reading stories to girl scouts. this is ridiculous. i think that there are certain sponsors where it will be a problem. will michael vick ever get blue

chip sponsors himself again? probably not. but i do think -- >> but people said that about kobe bryant, eric. >> yeah, but eric, at the end of the day -- >> care about dogs more than anything else. >> if the guy can help philly beat the giants, isn't that the bottom, bottom line? >> that's right. >> the first game or two might be a little, you know, but you're right. philly is a tough town. they want to beat the giants! >> yeah, this is not san francisco where i think it would be a problem, because you would have a collision of animal rights activists and sports fans. >> so what kind of shape is he in? what kind of shape is he in? is he ready to play, because if he starts out bad, people are going to cream him. >> he said he's not ready. but that's okay. they have donovan mcnabb, they'll play him in the preseason in week three when they can, and they'll -- >> this is what we're talking about on a day when ely manning became the highest-paid player in the nfl. they were talking about michael vick. >> $97 million contract for ely

manning, no one is talking about. but you don't control what the news is. >> well, we do, actually. >> well, but we control -- >> that's right -- >> what we want to hear about. >> i think you have to remember that michael vick -- this is not a cuddly personality. this is not a guy who is going to be able to get people to love him no matter what. less is more. yes, he has to apologize. yes, the occasional news conference. but this is not a pr charm offensive where he needs to convince everybody that he is a wonderful guy. >> redemption. >> we leave it there. thanks for joining us, eric. thanks, darren, as well. coming up, a possible double whammy for our nation's big banks. the obama administration is considering having the banks pay themselves for financial oversight. we have new details and why it could mean you having to pay higher bank fees. all coming up in today's "call of the wild." and just when you thought bernie madoff couldn't get anymore

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welcome back to "the call." i'm trish regan with larry kudlow and melissa francis. we want to get you caught up on the markets. look at this, off 164 30i79s on the dow, a decline of 1.7%, a lot being attributed to mixed economic signals, especially the way the consumer sentiment number this morning. s&p down 1.7%, down below that

1000 level at 9 95. on the nasdaq down, 2% there. >> boeing has worked at an assembly plant in i willy, working out its marquis 787 dream liner aircraft. the latest delay on the troubled project, which is the cornerstone of boeing's future. phil lebeau is in chicago with much more. how tough a story is this, phil? >> well, this is a story that just continues to get worse for boeing. and at this point, they have halted work on the carbon fiber composite fuselags -- remember, they have a worldwide production system. here's what's happened. they have stopped work on these fuselags -- actually stopped back on june 23rd, because boeing and its partner, the italian airline aircraft maker, they found microscopic wrinkles in the composite skin of the fuselage. boeing says it has developed a patch for those barrels that have already been made, put that patch on the outer skin.

so it's not a huge ordeal to fix airplanes 7 through 29. remember they're working on airplane 30 at this point. boeing is in the process of changing the manufacturing process for those fuselags. the company says there is no impact on the schedule in terms of first flight deliver or the cost of the 787. what is interesting is, we don't even know what the schedule is. we do know the company plans to have a revised schedule released by the end of september. take a look at shares of boeing down almost 5% today. again, yet another stumbling block, trish, for boeing as it tries to get the 787 up, and keep in mind, this problem separate from the issue of the structural strength of where the wing attaches to the fuselage. the company is in the process of fixing that problem when this problem has just come up. and one last thing, trish. i asked the company today, how come you didn't release this? and they said, if there is no impact on the cost or the schedule of the 787, there is no reason we should have released it sooner.

trish? >> thank you, phil below. the obama administration wants to charge higher fees for banks to help pay for financial reform. the banks saying it will put them at at a disadvantage, and they'll end up passing those fees on to consumers. are they right? let's bring in steven moore from "the wall street journal" and democratic strategist liz strattan. we're trying to get all of these banks back on their feet, back to profitsability, some of which we have actually seen good performance results of thus far. but how do we do that if we say, okay, we're going to start charging you higher fees? >> well, you just -- you stole my thunder there, trish, because that's exactly my point. you know, we've got to decide whether we want to be punitive on these banks, or whether we want to guide them back into profitable. and i think the idea of putting new fees on these banks is going to a., going to make it harder for them to gain profitability, and b., i agree with you, trish,

ultimately what happens here is this gets pushed on to the consumers of the banks, and that makes all these fees that we all hate so much all the more expensive. >> yes, but liz, i mean, weren't these banks the ones that caused all of the trouble to begin with, and how do you prevent that from happening in the future? >> well, it's a really interesting point. yes, they were a huge part of what caused all these and set up this drastic recession. i don't know about you, but in my family when you did something wrong, you got punished for it. and the banks did something wrong, at least the big banks did something wrong, and i do think there needs to be some punitive repercussions for what they did. now, i am also concerned that all these big banks are going to do is pass this on to the consumer. of there should be some language in any bill or in any law or anything that comes down from the administration that forbids that. not sure if they can pull that off. the bottom line is the big banks -- >> battle through the banks even more. you know, if you stop business, that's called free market capitalism. they have to pass their costs along, because they're in it for profits. so now what you're saying is,

let's tax them by hiking up fees, and let's make sure they eat it so that their performance is even worse and the taxpayers are on the hook even more and the financial healing will be less. >> big banks are always going to be profitable. >> really? willy-nilly, it doesn't maeft matter what costs they have? >> you think the big banks did this on accident? they got us in trouble because they wanted to make money. money, hand over fist, at everyone's expense. they deserve to be punished and reined in a little. yeah. they caused that recession. >> let me make a point about this. i agree with you. when people do something wrong, they should be punished. and you know what? the shareholders of those companies have been punished. a lot of the shareholders got wiped out. but here's the other problem. you know, what i object to larry, more than anything is why do we need this new regulatory super structure? we already have the banks regulated by the fdic, the treasury, the federal reserve bank. what do we even need this new consumer protection work for? >> the irony is as i understand

it, this new fee which liz doesn't want to pass along so the banks lose money is to support a consumer protection agency, the banks and the feds do not want. >> it's unneeded. >> let me bring one up one other point. you know where this is going to hit home? with the actual consumer, because they're going to end up paying higher fees when they open an account, when they have a checking account. all of that gets transferred to them. so in the end, aren't you hurting the very people you're trying to protect? >> and i have admitted i do think that's a problem and i hope they find ways to prevent that. i want to say something quick. for anybody to ask whether there needs to be additional regulation on the banks has clearly had their head in the sand for the last three years or six months. these banks were out of control and attempted to make absolutely bizarre profits at the expense of the american people and american economy. now i'm all about the american economy, but i'm also about making sure that people don't

have bad mortgages, and that this country digs itself out of a recession so that we don't go through this again. >> yeah, but the point is, they've already got four federal agencies that regulate these banks. what makes us think a fifth regulatory agency is going to change things at all? >> we're obviously getting their attention by putting in some punitive repercussions here, so we're all here talking about and we got people's attention. >> you know, consumer protection, steve, they already have consumer protection. and the federal reserve is going fight the administration tooth and nail. i want to ask you, what is the state of play between mr. bernanke and mr. geithner on this consumer protection agency. what i gather is bernanke is against it and not relenting. >> you've got that exactly right. and bernanke to nurse these big banks back to health as i think all of us as taxpayers and shareholders should want to do. do we want to be punitive on the banks, or do we want them back in good health? they paid back the t.a.r.p.

money and making the kind of loans that will make this economy strong again. i'm for the latter, not the former. >> i'm trying to figure out, liz, how you were going to stop the banks from passing these fees along to do damage to consumers. it's like you want to interrupt the flow of business. how do you do that? >> no, i absolutely don't want to interrupt the flow of business, and i appreciate that's going to be tricky. and that's why barack obama is president of the united states and i am not. because that's going to take some if a nation willing, no question. and i want to be very clear, i don't want to see these passed on to the consumers. i would like to see it come off ceo salaries. there are a lot of other places where banks can get these fees. >> we'll raise that one tomorrow. liz and steve, great to see you. >> did you. up next, the stock you need to watch for the rest of the traiting day. >> matt nesto, what is on your list? >> you know when a doctor puts you on that treadmill and stress test you to see how strong the ticker is. i've got a couple stocks that are holding up in the face of a weak market. i'll give you some losers, too,

some truth. but coming back, we give you some stress-test nesto picks. back after this.

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company, potential growth in its licensing business. the chart is trading up by 2.75% on the day. up almost a buck 3480. it's time for "call to action." cnbc's matt nesto is here with a look at what he is calling the august freeze. matt, a lot of stocks riding high that people are cashing in today. >> yeah, you know, the old christmas baby, it's cold outside. if you look at some of the measures here, the advanced decline ratio, and don't be fooled, folks, when you show some of these boards, it looks like five to one. but when you back out the jump -- the deferreds, and no disrespect to the preferreds, but when you look at it, it's almost ten to one negative in terms of the new york stock exchange. all ten sectors are down, all 24 industry groups. it's a wholesale selloff. and if you look at some of the hottest of the hot, general worth financial, the worst performer down 8%. still up 850% from the trough,

but citigroup occurring it to sell from hold today. and also las vegas sands, even they they got good news on the credit line front, it's an eight bagger from the trough. now, what is interesting, i mentioned the nesto stress-tested stocks. these are stocks that have been hugely hot but in this broad based selloff are holding on to gains. check out ford, down .1% today. and another with an upgrade, tenet health care, 4% higher, one of the few gainers in the s&p 500, and a 400% move, 60% from july 1st. so those are interesting, strong stocks with a big run-up. still hanging on to it. >> matt, talk to me about retail, because this is something that has been on a terror, kind of getting slammed. is it time to get out of these? >> i tell you, if you look at their retail index, you would say yeah, because there's only what, 31 or 35 members trading

down. very few. some of the big ones, we have talked about jcpenney and what's going on at nordstrom hit their number, but this is a company that historically tends to surprise. the forecast weak in some cases. we're definitely seeing selling going on in some of those names. if you take a look at the worst performer today, an old fashioned downgrade, barnes and noble, remember they did that deal to buy in their college book store unit, it's going massively push earnings. but we see a downgrade to underperform at credit swiss, hurting that one. and abercrombie one of the few that's working today. >> thanks so much, matt nesto. >> "power lunch" at the top of the hour. and we have bill griffith to describe what's in store. >> thank you lawrence, very much. it seems to happen every time, about this time of day, doesn't it? you know, for months, we have been talking about strategies for playing the rally in the market. is it time to think about strategies for playing the pullback. we'll look at those. also, steve liesman is again with us today. we're pleased to have him co

anchoring. he is going to look at why inflation still does matter in this economy. and first on cnbc, we'll talk with the massachusetts secretary of state, bill galvin will join us. he has rejected an offer of a settlement from one of the feeder funds in the bernie madoff scandal, order to make whole all of the investors in the fund, but he has rejected that. why? we'll ask him at the top of the hour on "power lunch." see you then. trish? >> thanks, phil. coming up, a switch in the scandal of bernie madoff. >> yes, a book author says it's the convicted wind is letter's mistress. mary thompson will fill you in on "the call." all you need is love.

schering-plough announcing the fda has approved the companies anti psychotic drug for treatment of schizophrenia and bipolar disorder. schering-plough is poised to merge with merck. both stocks trading lower. trish. >> here's the story we've been waiting for. did bernie madoff have more secrets than a ponzi scheme. a new book by cheryl winesteen says she was his mistress. so who is this woman, and what can she tell us. mary thompson joins us with intriguing answers. >> hi, trish, the book comes out on august 23 25th and she claims she saw madoff, quote, up close,

for more than 20 years. madoff's other secret, love, money, bernie and me. spoke with her and eight other victims on the day he pled guilty. here is how she met him. >> i had the privilege of knowing bernie, financial head of a charitable organization, and there was a donor in france that wanted to make a considerable contribution to the organization. the stipulation was that the funds remain with mr. madoff. >> at the time, winesteen was president of a women's charity for american jewish ties to israel. through 1998, a spokesman said it invested with a total of 80 million. the account had reportedly grown to over $100 million. the president, nancy fullcheck rights she was shocked to hear the report of her personalel alled missions. we knew nothing about it until today.

winesteen left in 1 1997. she also had personal investments with madoff, and in march she spoke of the scam's emotional toll. >> we are in our own jails right now, because of his actions. so that he is in jail on one hand is, yes, he belongs there. but we need to try to help ourselves get out of our jail now. >> back in june when madoff was sentenced to 140 years in prison, winesteen spoke in court, describing madoff as a beast and saying the day she met him was perhaps the unluckiest day of her life. >> so she is claiming she was a victim. what is the consensus? do people believe that or do they think she might be able to lead to more efforts in terms of the investigation, and potential feeder funds? >> well, on that front, there hasn't been anything said about that. again, this is coming out in a book. we'll know more details there. she wasn't involved in his business.

this was a personal relationship. so at this point right now, it's unclear whether or not she could provide investigators with any additional information. >> okay. certainly provides the media with more fodder there. mary thompson, thank you so much. melissa. >> yeah, trying to sell a book. back with the "last call" and the madoff scandal still growing. >> how about pillow talk? tools are uncomplicated? nothing complicated about a pair of 10 inch hose clamp pliers. you know what's complicated? shipping. shipping's complicated. not really. with priority mail flat rate boxes from the postal service shipping is easy. if it fits, it ships anywhere in the country for a low flat rate. that's not complicated. come on. how about...a handshake. alright. priority mail flat rate boxes only from the postal service.

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